Factors for Nvidia’s stock price increase

Nvidia (NVIDIA) is the world’s largest graphics processing unit (GPU) manufacturer, providing high-performance computing technology for various fields such as gaming, artificial intelligence (AI), metaverse, and so on. Nvidia’s stock price has risen by about 550 times in the past 20 years, and recently surpassed Berkshire Hathaway, the investment company led by Warren Buffett, to rank seventh in the U.S. by market capitalization . Then why does Nvidia’s stock price keep rising? In this article, we will look at the factors that influenced Nvidia’s stock price increase and the future outlook.

Factors for Nvidia’s stock price increase

 

1. Growth of data center segment

The reason why Nvidia’s stock price rose rapidly in the past 1-2 years is thanks to the growth of its data center segment. The data center segment was not originally Nvidia’s ‘main business’. Nvidia started as a company that developed and sold GPUs, which were mainly used for games or graphic work. However, GPUs have been recognized as essential elements in fields such as AI or cloud computing because they have excellent parallel processing capabilities. AI or cloud computing requires processing large amounts of data quickly and accurately, and GPUs can perform these tasks more efficiently than CPUs.

 

Nvidia anticipated this market change and started to develop and provide software and platforms that can apply GPUs to data centers. For example, Nvidia’s CUDA is a software toolkit that enables GPU-based programming, and Nvidia’s DGX is a high-performance computing system for AI research and development. In addition, Nvidia cooperates with cloud service providers to provide GPU-based cloud computing services. For example, on Amazon Web Services (AWS) or Google Cloud Platform (GCP), you can choose an instance that uses Nvidia’s GPU.

Nvidia’s data center segment grew rapidly after the global pandemic of the novel coronavirus infection (COVID-19). This is because the demand for cloud computing increased as remote work and non-face-to-face education spread due to COVID-19. Also, as the utilization of GPUs increased in new technology fields such as AI and metaverse, Nvidia’s data center segment increased its sales and profits significantly. In the last quarter, data center segment revenue increased by 89% year-on-year to $2.65 billion, surpassing the gaming segment as the largest revenue segment.

 

2. Stable performance of gaming segment

Another factor that contributed to Nvidia’s stock price increase is the stable performance of its gaming segment. The gaming segment is Nvidia’s traditional business area, providing GPUs for PC games or console games. Nvidia has also continuously developed and launched innovative technologies in the gaming segment, expanding its market share. For example, Nvidia’s RTX series applied ray tracing technology to enhance the realism and detail of game graphics, and Nvidia’s DLSS (Deep Learning Super Sampling) technology used AI to improve the resolution and frame of game screens.

As the time spent at home increased due to COVID-19, the demand for games also increased. In particular, as new game titles began to support ray tracing technology, the demand for RTX series exploded. Nvidia launched RTX 30 series to meet this demand, and received a good response with its high-quality graphic performance and reasonable price. In the last quarter, gaming segment revenue increased by 85% year-on-year to $2.63 billion, accounting for about 40% of total revenue.

 

3. Business expansion in emerging fields

The last factor that influenced Nvidia’s stock price increase is its business expansion in emerging fields. Nvidia uses GPU and AI technology to develop innovative solutions for various fields such as autonomous vehicles, robotics, smart cities, etc. For example, Nvidia’s autonomous vehicle platform ‘Drive’ provides AI functions that recognize and analyze the inside and outside of the vehicle, providing a safe and convenient driving experience for drivers and passengers. In conclusion, Nvidia is a leading company in the field of GPU and AI technology, and has achieved remarkable growth in various fields such as data center, gaming, metaverse, etc. Nvidia’s stock price has risen by about 550 times in the past 20 years, and it is expected to continue to rise in the future as it maintains its strong performance and growth potential. However, Nvidia also faces some challenges and uncertainties such as the global semiconductor shortage and the regulatory approval for the acquisition of Arm. Therefore, investors should pay attention to these factors and make informed decisions based on their own risk appetite and investment goals.